The Square Foot

Small business optimism climbs incrementally

Confidence among Canada's small and mid-sized business owners climbed slightly in October. The Canadian Federation of Independent Business (CFIB)'s Business Barometer for the month measured in at a modest 63.6, almost a point above September's 62.7 and marginally higher than the 61.7 level posted in August when the latest round of sovereign debt and banking sector worries from Europe started sweeping around the world.
"Judging from past history, index levels in the low 60s are still associated with economic growth in Canada, but only just," said Ted Mallett, vice-president and chief economist for CFIB. "Performance may not be stellar, but at least this latest data suggest economic growth has not turned negative."

Business owners in Saskatchewan and Alberta are the most optimistic, with index levels just under 74. Ontario (62.0) and Quebec (60.3) is slightly below the national average, but the weakest optimism is found in Nova Scotia (58.4) and New Brunswick (59.6).
Optimism in the manufacturing, wholesale and retail sectors remains close to the overall average, however, optimism among those in the transportation and financial services sectors have fallen off significantly. Construction and hospitality also remain weak, while optimism in the healthcare and professional services sectors remain above average.
"Regardless, more business owners are saying their recent performance has been better than at any time since the recession began. After falling back significantly in August and September, amid economic uncertainty, business owners seem to have restored at least some of their capital spending plans," remarked Mallett adding "40 per cent of business owners describe their state of business to be in 'good' shape, almost three-times the 13 per cent who say it is poor."

Customer demand continues to be the most commonly cited constraint on business performance (41 per cent), followed by shortages of suitably skilled labour (37 per cent) and management skills and time constraints (31 per cent). More than two-thirds of respondents stated that fuel and energy costs are seen as the most problematic business input costs, given their variability.

"Taxes and the cost of complying with regulations are a problem for 58 per cent of business owners, while wage levels, banking fees and insurance costs are pain points for one business in two," concluded Mallett.
Measured on a scale between 0 and 100, an index level above 50 means owners expecting their businesses' performance to be stronger in the next year outnumber those expecting weaker performance. According to past results, index levels normally range between 65 and 75 when the economy is growing. The October 2011 findings are based on 1,003 responses, collected from a stratified random sample of CFIB members, to a controlled-access web survey. Findings are statistically accurate to +/- 3.1 per cent 19 times in 20.